UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 14, 2005
Extra Space Storage Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 001-32269 | 201076777 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification Number) |
| 2795 Cottonwood Parkway, Suite 400 Salt Lake City, UT |
84121 | |
| (Address of principal executive offices) | (Zip Code) |
801-562-5556
Registrant’s telephone number, including area code
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.01 Completion of Acquisition or Disposition of Assets.
On July 14, 2005, Extra Space Storage Inc. (the “Company”), through its subsidiaries Extra Space Storage LLC (“ESS LLC”) and Extra Space Storage LP (“ESS OP”), closed the acquisition (the “Transaction”) of various entities that collectively comprise the Storage USA self-storage business pursuant to the Purchase and Sale Agreement (the “Agreement”), dated as of May 5, 2005, between ESS LLC, ESS OP, Security Capital Self Storage Incorporated (“Seller”), a Delaware corporation, PRISA Self Storage LLC, a Delaware limited liability company, PRISA II Self Storage LLC, a Delaware limited liability company, PRISA III Self Storage LLC, a Delaware limited liability company, VRS Self Storage LLC, a Delaware limited liability company, WCOT Self Storage LLC, a Delaware limited liability company, and The Prudential Insurance Company of America, a New Jersey corporation (together with its affiliates, “Prudential”). The Transaction was previously announced by the Company in its Form 8-K dated May 5, 2005.
In connection with the Transaction, the Company acquired 61 wholly-owned self storage properties, acquired SUSA Partnership, L.P.’s equity interest in 54 joint venture properties and assumed the management of 84 franchise and managed properties. In addition, 259 of the self-storage properties acquired in the Transaction were contributed to five separate limited liability companies that are owned by five subsidiaries of the Company (each, a “Company Sub”) and Prudential. As part of this contribution, the Company Subs and Prudential entered into limited liability company agreements which govern the rights and responsibilities of each such limited liability company. The following table summarizes the material terms of such agreements:
| JV 1 |
JV 2 |
JV 3 |
JV 4 |
JV 5 |
Totals | ||||||||||||||||||
| Number of Properties |
97 | 74 | 36 | 29 | 23 | 259 | |||||||||||||||||
| Acquisition Cost (in millions) |
$ | 674.6 | $ | 547.5 | $ | 232.8 | $ | 191.2 | $ | 142.4 | $ | 1,788.5 | |||||||||||
| Debt Financing (in millions) |
$ | — | $ | — | $ | 145.0 | $ | 93.3 | $ | 52.1 | $ | 290.4 | |||||||||||
| Equity Investment by Company Subsidiaries |
$ | 13.5 | $ | 11.0 | $ | 4.4 | $ | 4.9 | $ | 4.5 | $ | 38.2 | |||||||||||
| Initial Percentage Interest of Company Subs |
2 | % | 2 | % | 5 | % | 5 | % | 5 | % | |||||||||||||
| Preferred Return (through December 31, 2007) |
8 | % | 8 | % | 10 | % | 10 | % | 9 | % | |||||||||||||
| Promoted Percentage Interest of Company Subs |
17 | % | 17 | % | 20 | % | 20 | % | 20 | % | |||||||||||||
Pursuant to the terms of each agreement, each limited liability company entered into a property management agreement with a subsidiary of the Company which authorizes such subsidiary to act as the day-to-day property manager of the properties held by such limited liability company in exchange for a property management fee equal to 6% of gross revenues derived therefrom. Joint approval by each Company Sub and Prudential is required with respect to certain major decisions relating to, among other things, acquisitions, certain dispositions, financing and leasing of the properties. In addition, subject to the terms of the applicable limited liability company agreement: (i) each Company Sub and Prudential have a right of first refusal with respect to the transfer of the other party’s interest in the applicable limited liability company; (ii) the applicable Company Sub has a right of first offer as a condition precedent to any sale by the applicable limited liability company of a property to a third party; and (iii) following the second anniversary of the closing, each Company Sub and Prudential have the right to trigger a buy-sell with respect to their interest in the applicable limited liability company.
A copy of the press release announcing the closing of the Transaction is attached as Exhibit 99.1 and is incorporated in this report by reference.
ITEM 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of Registrant.
Bridge Loan
On July 14, 2005, a subsidiary of the Company entered into a $100 million bridge loan with Wachovia Investment Holdings, LLC (the “Bridge Loan”), maturing on November 11, 2005. The Bridge Loan bears interest at the rate of LIBOR plus 150 basis points or at the base rate specified therein and is guaranteed by the Company and certain subsidiaries of the Company. The Bridge Loan provides for various customary events of default which could result in an acceleration of all amounts payable thereunder. The terms of the Bridge Loan require that it be repaid with the proceeds of any equity offerings by the Company.
Mortgage Loans
In connection with the Transaction, subsidiaries of the Company entered into three mortgage loans with Wachovia Bank, National Association (each, a “Mortgage Loan” and, collectively, the “Mortgage Loans”). One Mortgage Loan is in the original principal amount of $101 million, is secured by deeds of trust/mortgages on 19 self-storage properties, bears interest at the fixed annual rate of 5.285% and matures on August 11, 2015. A second Mortgage Loan is in the original principal amount of $112 million, is secured by deeds of trust/mortgages on 23 self-storage properties, bears interest at the fixed annual rate of 5.285% and matures on August 11, 2015. The third Mortgage Loan is in the original principal amount of $100 million, is secured by deeds of trust/mortgages on 15 self-storage properties, bears interest at the fixed annual rate of 5.26% and matures on August 11, 2010. Each of the Mortgage Loans provides for various customary events of default which could result in an acceleration of all amounts payable thereunder.
Acquisition Loan
In connection with the Transaction, a subsidiary of the Company entered into a $28 million acquisition loan with Wachovia Bank, National Association (the “Acquisition Loan”), which matures on August 1, 2007. The Acquisition Loan is secured by the borrower’s interests in promissory notes and mortgages on eleven self-storage properties and bears interest at the rate of LIBOR plus 200 basis points. The Acquisition Loan provides for various customary events of default which could result in an acceleration of all amounts payable thereunder.
ITEM 3.02 Unregistered Sales of Equity Securities
In connection with the Transaction, on July 14, 2005, the Company issued approximately 1,470,150 units of limited partnership interest in ESS OP (the “ESS OP Units”) with an aggregate value of approximately $22.7 million. Beginning on the first anniversary of the closing of the Transaction, these ESS OP Units are exchangeable, on a one-for-one basis, for shares of common stock of the Company, subject to the right of the Company to pay cash in lieu of issuing shares at the then fair market value of the shares. The ESS OP Units were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), contained in Section 4(2) and Regulation D thereof. Each recipient of ESS OP Units was an “accredited investor” as defined in Rule 501(a) of Regulation D of the Securities Act. Pursuant to the terms of the Agreement, additional ESS OP Units may be issued following any final purchase price adjustments.
In connection with the Transaction, each recipient of ESS OP Units (the “holders”) entered into a lock up agreement with ESS OP and a registration rights agreement with the Company. The registration rights agreement requires the Company to use commercially reasonable efforts to file with the Securities and Exchange Commission no later than 12 months following the date of the closing of the Transaction a registration statement under the Securities Act on Form S-3 covering future resales of any shares of common stock received by the holders upon exchange of the ESS OP Units issued to them in the Transaction and to cause such registration statement to be declared effective as soon as practicable thereafter.
ITEM 9.01 Financial Statements and Exhibits.
Set forth below are the financial statements relating to the completed acquisition described above that are required to be filed as part of this Form 8-K:
| (a) | Financial Statements of Business Acquired. |
The financial statements required by this item will be filed by amendment not later than 71 calendar days after the date that this Form 8-K must be filed.
| (b) | Pro Forma Financial Information. |
The financial information required by this item will be filed by amendment not later than 71 calendar days after the date that this Form 8-K must be filed.
| (c) | Exhibits. |
| Exhibit 99.1 |
Press Release, dated July 14, 2005 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| EXTRA SPACE STORAGE INC. | ||
| By: | /s/ Charles L. Allen | |
| Name: | Charles L. Allen | |
| Title: | Senior Vice President, | |
| Senior Legal Counsel | ||
Date: July 14, 2005
EXHIBIT 99.1
EXTRA SPACE STORAGE INC.
PH (801) 562-5556
FAX (801) 562-5579
2795 E. Cottonwood Pkwy. Ste. 400
Salt Lake City, Utah 84121
info@extraspace.com
www.extraspace.com
FOR IMMEDIATE RELEASE
Extra Space Storage Inc. and Prudential Real Estate Investors Announce Closing of Acquisition of Storage USA from GE Commercial Finance
| • | Extra Space Storage becomes second largest self-storage operator in the U.S. |
SALT LAKE CITY, Utah, July 14, 2005 – Extra Space Storage Inc. (the “Company”) (NYSE: EXR) and joint venture partner Prudential Real Estate Investors (“PREI”), the real estate investment and advisory business of Prudential Financial, Inc., announced today the closing of the acquisition of Storage USA from GE Commercial Finance, the business-to-business financial services unit of the General Electric Corp. (NYSE: GE) for approximately $2.3 billion in cash. The transaction is the largest to date in the self-storage industry and makes the Company the second largest self-storage operator in the U.S. with over 630 properties owned or under management.
As a result of the acquisition, the Company owns one-hundred percent of 61 Storage USA properties, and through the PREI joint venture, has an ownership interest in an additional 259 Storage USA properties. The Company also acquires Storage USA’s equity interest in 54 joint venture properties, and assumes the management of 84 franchise and managed properties.
Kenneth M. Woolley, Chairman and CEO of Extra Space Storage said: “The closing of this transaction is a tremendous achievement for Extra Space Storage and our partners at Prudential Real Estate Investors. We are acquiring well-located, high quality properties, with the majority of them located in our current core markets. We believe that with our scalable technology systems and operational processes we will be able to add value throughout this expanded portfolio. The transaction will also provide value to our shareholders, and is consistent with our strategy to become a major force in the U.S. self-storage industry.”
PREI is acquiring the self-storage properties on behalf of investors in its open-end commingled funds, and two individual client accounts.
(more)
Forward Looking Statements:
When used within this document, the words “believes,” “anticipates,” “projects,” “should,” “estimates,” “expects,” and similar expressions are intended to identify “forward-looking statements” within the meaning of Section 27-A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied in the forward-looking statements. Such factors include, but are not limited to, changes in general economic conditions and in the markets in which the Company operates:
| • | the effect of competition from new self-storage facilities or other storage alternatives, which would cause rents and occupancy rates to decline; |
| • | the Company’s ability to effectively compete in the industry in which it does business; |
| • | difficulties in the Company’s ability to evaluate, finance and integrate acquired and developed properties into the Company’s existing operations and to fill up those properties, which could adversely affect the Company’s profitability; |
| • | the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing Real Estate Investment Trusts, which could increase the Company’s expense and reduce the Company’s cash available for distribution; |
| • | difficulties in raising capital at reasonable rates and on reasonable terms, which could impede the Company’s ability to grow; and |
| • | delays in the development and construction process, which could adversely affect the Company’s profitability; and economic uncertainty due to the impact of war or terrorism which could adversely affect its business plan. |
The Company disclaims any obligation to publicly release the results of any revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this report.
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About Extra Space Storage Inc.
Extra Space Storage Inc., headquartered in Salt Lake City, Utah, is a Real Estate Investment Trust that operates over 630 self-storage properties in 34 states including Washington, D.C. The Company’s properties comprise more than 400,000 units and 43 million square feet rented by over 330,000 tenants. The Company is the second largest operator of self storage in the U.S. Additional Extra Space Storage information is available at www.extraspace.com.
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| For Information: | ||||
| James Overturf | William Coffin | Theresa Miller | ||
| Extra Space Storage Inc. | CCG Investor Relations | Prudential Financial, Inc. | ||
| (801) 365-4501 | (310) 477-9800 | (973) 802-7455 | ||